Applying for a new line of credit is likely to improve your credit score in the long term - as long as you're approved. This is because the additional credit increases your overall credit limit, which lowers your credit utilization ratio. Credit utilization ratio factors heavily into your score, so keeping a lower credit utilization ratio usually helps your score. Here is some information on how credit utilization is calculated.
However, when you request a credit line increase from your issuer or open a new card, this initiates a hard inquiry to your credit report. Hard inquiries usually cause you to lose a few points on your credit score in the short term, but as long as you’re practicing good credit habits, it should bounce back quickly. Therefore, the simulator is predicting the long term effects of applying for a new credit card instead of the short term effects.